In the monthly WASDE report released on Nov. 8, the USDA’s World Agricultural Outlook Board estimated that 4.648 billion bushels of corn were used to produce ethanol and co-products during the 2012-13 marketing year.

That estimate is 371 million bushels less than the estimate for the 2010-11 marketing year and 352 million less than estimated use during the 2011-12 marketing year. Domestic ethanol production declined from an estimated 13.796 billion gallons during the 2011-12 corn marketing year to an estimated 12.899 billion gallons last year.

On the surface, the reasons for the year over-year decline in ethanol production and corn use in the 2012-13 marketing year are not obvious.

Based on estimates from the U.S. Energy Information Administration (EIA), domestic ethanol consumption (including small quantities of denaturant) was nearly identical in the two years, totaling 12.933 billion gallons during the 2011-12 corn marketing year and 12.991 billion gallons last year.

The decline in ethanol production, then, was not associated with a decline in domestic consumption. The decline reflected a year-over-year change in the ethanol trade balance and a change in ethanol inventories.

During the 2011-12 marketing year, imports were a modest 293 million gallons and exports were quite large at 1.095 billion gallons. The large positive trade of ethanol reflected, in part, reduced Brazilian ethanol production and exports stemming from smaller supplies and higher prices of sugar.

During the 2012-13 marketing year, U.S. ethanol trade was balanced. Estimated imports totaled 558 million gallons and estimated exports totaled 567 million gallons. The difference of 793 million gallons in the trade balance between the two years represents about 285 million bushels of corn.

Estimated ethanol stocks at the end of the 2011-12 corn marketing year were 62 million gallons larger than stocks at the beginning of the year. An estimated 22 million bushels of corn, then, were used as a result of the build-up in inventories.

In contrast, ethanol stocks at the end of the 2012-13 marketing year were 101 million gallons smaller than stocks at the beginning of the year. The drawdown in stocks replaced about 37 million bushels of corn to produce ethanol. The difference in ethanol stock changes during the two marketing years represented about 59 million bushels of corn.

When added to the difference of 285 million bushels of corn represented by the change in the ethanol trade balance, the total is very close to the 352 million bushel decline in the USDA estimate of corn use for the two years.